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Presentation

Village Farms International, Inc. reports earnings inline with expectations. Reported EPS is $0.02 EPS, expectations were $0.02.

Operator: Good morning, ladies and gentlemen. Welcome to Village Farms International’s First Quarter 2026 Financial Results Conference Call. This morning, Village Farms issued a news release reporting its Financial Results for the first quarter ended March 31, 2026. That news release, along with the company’s financial statements, are available on the company’s website at villagefarms.com under the Investors heading. Please note that today’s call is being broadcast live over the Internet and will be archived for replay both by telephone and via the Internet beginning approximately 1 hour following completion of the call. Details of how to access the replays are available in today’s news release. Before we begin, let me remind you that forward-looking statements may be made today during or after the formal part of this conference call.

Certain material assumptions were applied in providing these statements, many of which are beyond our control. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied in forward-looking statements. A summary of these underlying assumptions, risks, uncertainties is contained in the company’s various securities filings with the SEC and Canadian regulators, including its Form 10-K MD&A for the year ended December 31, 2025, and 10-Q for the quarter ended March 31, 2026, which will be available on EDGAR and SEDAR+. These forward-looking statements are made as of today’s date, and except as required by applicable securities law, we undertake no obligation to publicly update or revise any such statements.

I would now like to turn the call over to Michael DeGiglio, Chief Executive Officer of Village Farms International. Please go ahead, Mr. DeGiglio.

Mike DeGiglio: Thank you, Latif. Good morning, and thank you for joining us for our first quarter results call. With me today are Steve Ruffini, our Chief Financial Officer; Ann Gillin Lefever, our Chief Operating Officer; and Sam Gibbons, our Senior Vice President of Corporate Affairs. I will begin with my customary review of our highlights from the quarter, and then Steve will review the financials in more detail before I provide some last closing comments. Before we begin, though, a quick note to everyone on some changes to our SEC segment financial reporting after effectively becoming a pure-play cannabis company following the completion of our produce transaction last year. We’re all in our global cannabis, one global company with purpose-built production facilities that serve our commercial sales channels.

Accordingly, we have now realigned our operating structure and financial disclosures to reflect a singular unified cannabis business with a single cannabis segment. The change reflects the true nature and focus of our business today. Steve will address the new reporting in more detail momentarily. Okay, so let’s move to our first quarter performance, which reflects a strong start to the fiscal 2026 year for Village Farms. We are pleased to begin this year with continued momentum in our largest markets. We generated total net sales growth of 27% year-over-year, driven by our international business and continued leadership in Canada. In terms of sequential performance from Q4, revenue was up roughly 2%, which was in line with our expectations given our capacity constraints ahead of our expansion projects coming online during the second half of this year.

Consolidated adjusted EBITDA growth of 118% year-over-year significantly outpaced sales, and we delivered a fourth consecutive quarter of positive net income, clearly demonstrating the sustainable profitability of our expanding global cannabis enterprise. The continued strength of our international medical business was once again a powerful driver of growth and profitability with international export sales increasing 171% year-over-year and 60% sequentially to a record of nearly $15 million. And I will note here, we achieved this record net of the orders initially expected to ship in Q4 that slipped into Q1, which we mentioned on our last call. The German market continues to stand out in terms of its contribution to our international sales.

We continue to have 3 of the top 5 leading cultivars in Germany and 4 of the top 10 through our distribution partners, and we’re capturing increasing share of the market, which continues to grow after the temporary decline we observed during the fourth quarter. We mentioned on last quarter’s earnings call that we anticipated returning to sequential growth in Germany during Q1, and we did. Outside of Germany, we’re experiencing steady performance in our other international markets, and we continue to expand — I’m sorry, we continue to expect that we will enter multiple new jurisdictions during the remainder of the year. Our team has also begun to explore opportunities outside of flower for us to potentially export other form factors to our growing list of international partners.

Finally, I’ll note that demand from our international customers continues to increase, and that pricing for our EU GMP compliant flower is holding steady, whereas we are seeing price compression in many other parts of the supply chain. There have been several reports recently about declining pharmacy sales over the past year. While price normalization is a known trend in early-stage cannabis markets, key price differentiators are emerging in international markets that result from our ability to consistently deliver compliant product at industrial scale. We have good visibility and confidence that our pricing in Germany will remain relatively stable for the foreseeable future, which should give the investment community greater confidence in the continuing strength of profitability and our expanded capacity comes online and contributes to increased sales during the back half of this year.

Demand for our products continues to increase, and our partners are increasingly seeking our EU GMP compliant product in the wake of stricter regulations and enforcement that are restricting the flow of non-compliant product in several jurisdictions. In response to increasing demand, we recently completed facility upgrades at our production campus in British Columbia, which significantly expanded our total production capacity for EU GMP-compliant cannabis. As a result, we now believe we operate the world’s largest EU GMP certified cannabis facility, which further strengthens this competitive advantage to our business. Before I shift my discussion to operating highlights from other regions, I want to make clear that our success in international markets did not happen overnight.

Delivering consistent EU GMP compliant product is a complex process requiring multiple disciplines to work perfectly. Our team had the foresight to pursue EU GMP certification 6 years ago, and it was quite difficult to achieve. And it’s even harder to recertify, which we have also done. The investment is costly and time consuming and the learning curve to capably service these markets from an infrastructure, compliance, quality assurance, stability, product attributes and supply chain excellence perspective is very steep, not to mention the fact that our size, scale and efficiency of operations are not easily duplicated. There has been speculation about the potential for U.S. cannabis exports following the recent order to reschedule medical cannabis.

I will be clear that we are thrilled with the final order because we have built a compliant supply chain for medical cannabis that can succeed or be replicated with our assets in the United States. And in fact, if you extend the speculation of potential outcomes of the final order, we would be even more thrilled by continued progression towards free trade and open borders with Canada for imports of medical cannabis in the U.S. market in the future. Our viewpoint has always been that to be successful in plant-based consumer goods, you must simultaneously be a low-cost producer while delivering exceptional quality and value for customers. While we don’t disclose our cost of production, we can confidently say that we are one of the low-cost advanced greenhouse producers of cannabis in the world, and we work every day to continue driving our costs lower, and we continue to see opportunities to improve our cost of production.

I’ll now shift to review of our Q1 performance in the Canadian market, where we continue to benefit from the success of our shift — shift towards higher-margin products last year. Branded sales were up about 5% year-over-year with sequential performance in line with our expectations given seasonal and ongoing capacity constraints that we have discussed. I’d also like to take the opportunity to acknowledge that while some of our competitors have shifted their focus away from the branded sales channel in Canada, we remain committed to servicing our Canadian customers. We’re very proud of the consumer and brand loyalty we developed in Canada over the past 8 years, and we’ve been especially pleased to witness recent improvements of our performance in several of our targeted sales channel and product categories.

We continue to maintain a top 5 overall share position in Canada’s adult-use market and hold the #1 market share position in dried flower. I see, we expect to occupy for the foreseeable future based on our current view of the competitive landscape. Notably, our flagship Pure Sunfarms brand achieved its 15th consecutive month of market share gains in the flower category during the month of April, and our Fraser Valley brand is also making similar strides in addition to several other wins for our team with recent product launches in the vape and infused pre-roll categories. I also think it’s important to point out that our team has achieved all of this organically with a strict focus on optimizing profitability and enhancing our balance sheet strength as compared to many of our competitors.

In March, we began planting the first half of our additional capacity at our Delta 2 greenhouse. We are realizing the benefits of having done this before and are thrilled with what we’re seeing so far from this first planting. Our first harvest is expected to occur in the week of May 18, and we expect initial contributions in sales in late second quarter or early Q3. As a reminder, the Delta 2 expansion will ramp up its expected 40 metric tons of annual capacity by mid next year, which represents a 33% increase in our British Columbia cannabis production compared to fiscal year ’25, and we will continue to expect that we will harvest an incremental 15 metric tons of production from the expansion this year. All of this will drive economies of scale, cost efficiencies and improved flexibility to meet demand across our various sales channels.

Turning now to our recreational cannabis business in the Netherlands, where I’ll note that we believe the minor sequential sales decline we observed from our Drachten facility reflects typical Dutch consumer behaviors and seasonality following the holiday season. We recently hosted a ribbon-cutting ceremony for the celebration of the completion of construction of our Phase 2 facility in Groningen on April 24. We hope you were all able to see the video we shared on social media channels last week celebrating this important milestone. We’re incredibly proud of this facility, and we believe it to be one of the most advanced precision agricultural facilities, not just in the Netherlands, but potentially the world. Our asset management and facilities development teams have been designing, building and operating cultivation assets across the world for over 30 years and the environmental, HVAC and notably odor controls in this facility are truly next level.

As a reminder to those of you who may not be aware, the Groningen facility has access to 3x our current electricity needs, and the building was designed to accommodate a second story, if needed for expansion in the future. While we have previously communicated that we expected to have our first plants in the facility in late March, we are still waiting final certification and regulatory approval to commence full operations, which we expect will occur over the next couple of weeks. We have received both written and verbal communication that formal approval documentation is forthcoming in May, and we are looking forward to commencing all operations in Groningen before the end of Q2. I will also add that we don’t expect the Netherlands delay to impact our sales outlook for the full year given the quality of plants we are seeing in our Delta 2 expansion in Canada.

In summary, our first quarter was one of disciplined execution and performance that was in line with our expectations. And we’re experiencing no meaningful changes with respect to our medium- and long-term outlook for the business. We believe we have one of the most attractive cannabis growth platforms in the world, and we’re looking forward to showcasing the combined strengths of our expanding footprint as the year progresses. We’ll start the year on strong footing and what we believe is a clear line of sight to continue profitable growth for the remainder of this year and through 2027. This concludes my introductory remarks. And now I’ll turn the call over to Steve. Steve?

Steve Ruffini: Thanks, Mike. With the start of a new fiscal year, as Mike noted earlier, the company realigned its global operating model enough as required its financial reporting. The company’s operations are now organized, managed and classified into one reportable segment, reflecting our global cannabis business. The company’s remaining operations are now classified as other. We continue to report our consolidated segment results in U.S. dollars and financial results for comparative prior periods have been adjusted accordingly. Also starting this quarter, we are allocating costs for shared corporate services to the respective operating units. Most of these costs were previously recorded within our corporate unit. I’ll start with a review of our consolidated Q1 results.

Consolidated net sales increased 27% to $50.2 million, driven by continued strong performance in our largest cannabis markets, as Mike discussed. Consolidated net income from continuing operations improved to $2.7 million or $0.03 per share compared with a net loss of $2.1 million or $0.02 per share loss in Q1 of last year. Consolidated adjusted EBITDA from continuing operations increased 118% to $9.9 million from $4.5 million in Q1 of last year, resulting in an adjusted EBITDA margin of 20%, up from 11.4% in Q1 of last year. As I mentioned last quarter, in 2025, we accrued Canadian corporate income taxes of CAD 16.4 million or USD 12.1 million, which was paid in February of this year, along with monthly prepayments towards 2026 Canadian corporate income tax.

In prior years, we did not pay income tax due to carryover tax losses, all of which we have now utilized. The impact of the large Canadian corporate income taxes in Q1 resulted in negative cash flow from operations of $16.8 million. Cash flow from operations was also impacted by noncash changes in working capital, which reflects some investments made during the quarter to support our domestic business in Canada. And I’ll note that we expect to return to positive consolidated cash flow from operations during Q2 and through the remainder of this year. Turning now to our cannabis segment. Net sales were $49.9 million or a 27% increase versus Q1 of last year. The year-on-year improvement was driven by the strong performance in our international medical exports, which increased 171% over Q1 of last year and 60% sequentially, predominantly from Village Farms taking larger share of Germany’s growing market with continued stable performance in other markets as well as a full quarter of performance from our Drachten facility in the Netherlands compared to a partial quarter last year.

As Mike mentioned, we’ve experienced a slight delay in the commencement of operations in our Phase 2 facility in Holland, but continue to expect this facility will contribute to stronger sales and adjusted EBITDA performance as it continues to ramp during the second half of this year. Cannabis gross margin was 43%, up from 39% in Q1 of last year, reflecting higher international export sales as well as a larger contribution from our Netherlands operations and benefits from our strategic shift toward higher-margin products in Canada. This reflects another consecutive quarter of gross margin performance above our targeted 30% to 40% range. SG&A as a percentage of sales was 30% level with Q1 of last year, reflecting the continued efficiency across our cannabis operations, offset by the ramp-up staffing to support the launch of our Phase 2 facility in the Netherlands.

Q1 adjusted EBITDA from continuing operations for cannabis improved 48% to $10.2 million from $6.9 million in Q1 of last year, resulting in an adjusted EBITDA margin of 20.5% of sales. Q1 cash flow from cannabis operations was negative $11.8 million compared to positive $2.9 million. Excluding the impact of our tax payments, I mentioned a moment ago, cash flow from operations would have been $4.1 million. I’ll note that we believe we are the only major Canadian cannabis LP in the position of paying corporate income taxes, which is a testament to the strength of our operating capabilities and strong stewardship of capital on behalf of our shareholders and a sign of a sustainable long-term profitable business platform. As we do each quarter, I will point out that in Q1, we also paid Canadian excise taxes on our retail branded sales of $15.9 million or nearly 40% of gross retail branded sales.

Turning to the balance sheet. We ended Q1 with cash of approximately $56 million, which includes restricted cash of $5 million with a net cash — in a net cash position of $20 million. With expected strong cash flow from operations throughout the remainder of the year and taking into account the $15 million of income taxes, $9.2 million in capital expenditures and $6.4 million of share repurchases in Q1, we expect to increase our cash balance from positive cash flow from operations through the remainder of this year. Our total debt at the end of Q1 was $36 million. We remain very comfortable with our debt level. During the quarter, we favorably amended and extended our loan agreement with Farm Credit Canada with an improved interest rate and extended the maturity date by nearly 4 years to February 2031.

Finally, we continue to be active with our share repurchase program. As a reminder, our Board approved up to a $10 million buyback, but under Canadian statute, we could purchase up to 5% of our shares in a 12-month period. During Q1, we purchased over 2 million shares at an aggregate cost of $6.4 million. And during the second quarter, we completed the Board-approved repurchase authorization in its entirety. Our Board and management will continue to evaluate capital allocation decisions on a quarterly basis, and we expect to maintain a balanced approach to capital allocation to drive returns to shareholders. I will now turn the call back to Mike for some closing comments.

Mike DeGiglio: Thanks, Steve. In closing, our first quarter results again demonstrated the strength, durability and scalability of our operating model as well as the world-class talent, expertise and execution from our impressive global team. We believe we are positioned as one of the most attractive cannabis growth platforms internationally with a clear path to continue profitable growth in our existing markets. Before we open up the call to questions, I’d like to make some final comments regarding our perspective on rescheduling in the U.S. and how we are thinking about evaluating the many growth opportunities we see in front of us. As I mentioned earlier, we are thrilled with the rescheduling process, and the contents of the final order were more favorable than we were anticipating.

This finally gives us the type of regulatory progress we need to start reevaluating our U.S. strategy. However, a lot still remains unclear with how rescheduling is going to play out at the federal level and a lot of uncertainty remains in the state of Texas. So we are going to remain patient. Our interpretation suggests that if we were to obtain a state medical license with DEA approval, then we may be able to maintain our NASDAQ listing, which we have both direct oversight and consolidate those financials in the same way we oversee and account for all our businesses. We support the structure for longer shareholder value creation. Without diverging sensitive nonpublic competitive information on the call, we can share with confidence that based on our ongoing conversations, we are emerging as a partner of choice and a potential acquirer of choice in the global cannabis industry, and that also includes the United States.

There are many operators of all sizes across the world who would love to become part of our proven and profitable global platforms, and there is an abundance of opportunity for us to consider. Now having said that, I would also make it abundantly clear that we are not going to do deals just for the sake of doing deals. We believe good deals come from those who are prepared, patient and selective. I remain one of our largest shareholders, and I often say that the best deals sometimes are the ones you don’t make. We will be extremely cautious, prudent and highly disciplined with respect to any strategic M&A activity that we consider, and we will only pursue opportunities that are strategically compelling, financially attractive and supportive of long-term shareholder value creation.

This should not come as a surprise to anyone in the investment community who knows us well. But for those who don’t, there’s no greater way for me to illustrate our commitment to a disciplined shareholder-friendly approach to M&A than to appoint our long-term CFO, Stephen Ruffini, to lead this important function for us. Steve has been our CFO for over 17 years and has been instrumental in evolution to world leader in cannabinoid-based consumer packaged goods, and he is invaluable and a trusted adviser to our Board of Directors and management team, and he’s also a large shareholder. Steve, on behalf of everyone at Village Farms, we thank you for your leadership in these past 17 years and for your strong stewardship of capital for shareholders.

We are honored for you that you’ve agreed to delay your retirement to step in this role, and we are all excited to continue working together. Thank you all. Operator, we’ll take any call.

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Operator: [Operator Instructions] Our first question comes from the line of Aaron Grey of AGP.

Aaron Grey: So first, I just want to talk about some of the commentary you made for international and some of the pricing dynamics with your outlook for 2026 as you bring additional capacity online from Delta 2 expansion. Can you provide some detail in terms of the confidence — where you’re getting the confidence of your own price stability versus others calling out pricing pressure? And then could you provide some color in terms of the degree of margin difference between Canada and the international exports, if you could just remind us of that.

Mike DeGiglio: Sure. I’m not going to give you any color on the margin. That’s — we keep that internal. But regarding price compression, we — as I said on the call, for our — specifically our EU GMP certified product, we have not seen really any margin compression. That’s being driven, as I said, by our product and meeting all the attributes that are required. We’ve seen the compression for others tied to GACP, greenwashing, as I call it, the magic wand to try to get a compliant product. That’s where that compression is coming from. But for us, we feel with our product specifically, as I said, Village Farms, we don’t foresee much compression.

Aaron Grey: Okay. Great. Appreciate that color. And Steve, congrats on your time as CFO and best of luck in your next venture leading M&A. Next question on that front. You alluded to some of the opportunities that are coming up both in the U.S. with rescheduling as well as international, but wanting to take a prudent approach. So how best to think about how aggressive you guys potentially get in acquisitions, given you talked about potential exports in the U.S., potentially exporting from your Drach facility into the U.S., just given some of the pretty notable unknowns and what that could mean towards your current footprint and what you need in addition. How do we think about how aggressive you might get in M&A? And what would be additive to your portfolio amid different potential outcomes of what reform could mean?

Mike DeGiglio: Well, internally, we keep focusing on what we know is possible with the new order, not what is not possible because the clarity will really probably start showing up in the next — between the next 2 to 6 months. And that’s why we need to be patient. I’ve said all along that we do not want to make decisions that involve capital without knowing absolutely what the regulations are. And you learn from your mistakes, and we’ve always had that, but I’ll just be very candid and upfront. When we acquired the CBD business some years ago, when it was scheduled in ’17 under the President Trump’s descheduling order under the Farm Bill, it was very clear to us that CBD and other cannabinoids from hemp made it. Well, when you see what’s happening today, they’re trying to put the toothpaste back in the tube.

And here we sit and wait for November for some new clarity on what the future is. That’s an example of not deploying capital without knowing for sure. We’re not being prudent and patient because we’re lazy. We want to know what the ground rules are before we move forward. And I think that clarity will be much clearer in 3 to 6 months. We predicted that once the executive order was final, there would be lawsuits. And as you know, Sam filed and it’s going to have to go through a number of gyrations of lawsuits. The DEA is starting a review at the end of June through mid-July. We’re going to wait to see what the outcome is. Where does the DEA pencil in support or nonsupport. So that just gives you an example, Aaron, of why we need to be prudent.

The other thing is valuations. Sometimes I just scratch my head a lot on the valuations other companies are willing to pay for certain assets. And there’s a huge discrepancy between public company valuations and private company valuations. So that’s another example of not going after a shiny object and just paying — overpaying for it. So I hope that gives you some color on that.

Operator: Next up, we have Frederico Gomes of ATB Cormack Capital Markets.

Frederico Yokota Gomes: Congrats on a great quarter. Just want to follow up on Germany. You mentioned you’re capturing increasing share of that market and you continue to see a stable pricing environment for your products specifically. So can you help us understand how are you being able to capture that share and keep that pricing stable? Is it related to the high quality of your product maybe that competitors can’t compete at your price level or distribution relationships? Or is it your brand? If you just could provide more color there.

Mike DeGiglio: Okay. I’ll start it off, and then I’m going to give Ann some time on that. So as I said in my remarks, it’s been a 6-year journey here. And in order to — and our focus has always been the high road. We have done nothing but EU GMP from the start. So we didn’t try to cut corners at all. We never did. And as I said, taking GACP or non-EU GMP product and washing it through a facility to try to get compliant. You’ve seen how that’s sort of backfired with all the tens of millions of dollars that went into Portugal, even in Malta in the early years by so many companies spending money to circumvent strict EU GMP. And those products are the ones that are compressing down the market. We’ve seen regulators now providing very strict enforcement, not only in those other countries that are trying to supply Northern Europe, but in Canada as well.

So that was our decision, and it was the right decision, and we’re continuing to expand. Our campus is almost fully EU GMP compliant for the whole facility in British Columbia, which is an incredible achievement. But those other attributes I mentioned, there is no more — this is almost pharmaceutical grade. There is no more stringent requirement than to meet these requirements, as I said, from stability testing that can take a year for strain to get to. And just having — and then being able to actually execute and deliver products on time. So without getting too deep into those key attributes that we’ve been able to achieve, that’s really what’s driving it. And I hope that answers your question, Federico. Ann, do you want to give some color?

Ann Gillin Lefever: Not much to add. I think Mike covered it. But the only thing I would say is wrap it all up into we have invested in our supply chain and not just in the last year, but over multiple years. And so that gets us scale, consistency and price. And then layer on that, as you know, Federico, our belief in quality and leading with strains of high quality, which we try to do throughout the world that just feeds into the supply chain as well.

Frederico Yokota Gomes: I appreciate that. And then a second question on the Netherlands. I guess you mentioned some seasonality in that market, but could you talk about the supply-demand dynamics there? Any update? Has it changed? I think you mentioned in the past that the market was a little bit supply constrained. Is that still the case as well as any commentary on pricing in the Netherlands?

Mike DeGiglio: Yes, go ahead.

Ann Gillin Lefever: Sure. So I think all supply — all competitors are now fully up and running. So supply has improved. And that dynamic then plays out with some pricing softness across the category, which we did anticipate as we modeled the market. So nothing out of spec to what we anticipated.

Operator: [Operator Instructions] Our next question comes from the line of Pablo Zuanic of Zuanic & Associates.

Unknown Analyst: This is Milton on for Pablo. To start, regarding the Netherlands, could there be any changes to the pilot program after this summer’s review? And please comment on market conditions in your pilot towns, the market size, growth trends, competitive dynamics and pricing?

Mike DeGiglio: Well, I’ll start off and then hand it over to Ann. So my gut feeling is it can only be more positive after this 1-year review. Due to the fact that what we’re hearing from the regulators is they’re very satisfied. The amount of infractions are minimal. There’s no one selling to the illicit trade. And I think it’s going to be a positive report based on the first year out. As far as the market and do you want to add some color?

Ann Gillin Lefever: I’m not sure about the second part of your question. Mike answered the first. You mentioned about dynamics in our specific market. I just maybe pause here to say we sell throughout the Netherlands. We don’t have — we’re not restricted to the market we produce in. It’s a little bit of a different structure. So if I missed the point of that question, feel free to clarify.

Unknown Analyst: So sort of any expansion on the competitive dynamics in your specific areas? And obviously, if you’re throughout the Netherlands, which you are operating in, just the growth trends and market conditions you’ve been seeing? Obviously, you answered Frederico, but any expansion would be helpful.

Mike DeGiglio: Well, I mean, it’s a finite market. So there’s, as you know, 590 coffee shops in the Netherlands, about 80 are in this first phase legalization. We sell almost all 80, maybe 75 of the 80 throughout the Netherlands and those municipalities are scattered around the Netherlands. So at this point, there is no indication that there will be added municipalities at the near future. That could come. But at this point, it’s pretty finite. So you have 10 license holders and about 80 of the participating coffee shops involved in it. As far as Ann touched on, I mean, when we did our model out, we modeled it out over 4 years. And like any other market, there would be compression at that time. And I’ll just illustrate that what we refer in the Netherlands is not really stores or dispensaries.

These are coffee shops that have more of a lounge type of environment and the government wants to continue that. Most municipalities do not want to move to a dispensary format, but keep it as a social and combined with being able to purchase cannabis. But many of our consumers there buy daily. They don’t buy — in fact, our biggest sales are 1 gram flower package, which, of course, you know is more expensive to produce, but that’s what the consumers want. They like coming in every day and buying some of them or most of them staying in the coffee shop and others, of course, leave. So I hope that…

Ann Gillin Lefever: Nelson, the only thing I would just add is in terms of your question around expansion and growth is we are seeing — and faster than we saw in other markets, we’re seeing an expansion into forms factor. And that would be logical given that there already was an existing market in place. So the consumer is sophisticated, and we’re getting great feedback from the coffee shop partners that we sell into and the consumer as to how our products are doing.

Unknown Analyst: Thank you for that, it colors on the consumer behavior. Just one more follow-up on Germany. Assuming MSOs are allowed to export to Germany, do you believe they can be cost competitive?

Mike DeGiglio: I’m not going to — I don’t want to assume they can be or cannot be. I think I’d rather — the way we look at it is we know how difficult it is to scale up to that size to do it. And I’m not saying they couldn’t do it. It’s going to take time. The regulatory process. If the DEA allows exports, every single shipment will have to have DEA approval. There’s a lot that’s going to go into it. So I would just say that like us, we would look at — I think you should look at what your cost of production is going to be further out, not just where it is today.

Ann Gillin Lefever: And Milton, I would just add that Mike was pretty clear. We are — we believe we’re the world leader right now in cost of production. And we’re not stopping at the current cost of production.

Unknown Analyst: Congrats on the fiscal quarter. That’s all.

Operator: [Operator Instructions]

Mike DeGiglio: I think that’s it then, right?

Operator: Yes, sir. I would like to turn the call back over to Mike DeGiglio for closing remarks. Go ahead, sir.

Mike DeGiglio: All right. Thanks, operator. Thank you, everyone, for listening today. We look forward to reporting on the second quarter in August. Have a great day.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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